2. Meaning
•International trade is the exchange of goods and
services between countries.
•This type of trade gives rise to a world economy,
in which prices, or supply and demand, affect and
are affected by global events.
•IN BUSINESS point of view “The exchange of
goods or services along international borders.
This type of trade allows for a greater competition
and more competitive pricing in the market.
3. Definition
According to Wasserman and
Haltman, “ international trade consists
of transaction residents of different
countries”
According to Anatol Marad,
“International trade is a trade between
nations”
According to Edgeworth, “
International trade means trade
between nations”
4. BENIFITS
Greater variety of goods available
Efficient allocation and utilization
Promotes Efficiency in production
More employment
Consumption at cheaper cost
Reduced trade fluctuations
Utilization of surplus produce
Fosters peace and goodwill
5. BASIS FOR INTERNATIONAL
TRADE
•International specialization
•Difference in costs
Absolute costs difference- based on
countries
Comparative costs difference-based on all
goods
•Non- availability of a specific factor
•Product differentiation- Ex –textile-saree
(varieties)
6. FOREIGN TRADE and ECONOMIC GROWTH
•Diversified consumption
•Promotes capital formation
•Enables a country to produce goods which are more
economical, competitive and develops economic bond
between countries
•If there is No trade, no stimulus for growth
FACTORS
•Capital through international investment
•Means of development
•Technical know-how
7. BALANCE OF TRADE
The balance of trade is the difference
between the monetary value of exports and
imports in an economy over a certain period of
time
DEFINTION
Balance of trade of a company is the relation
over a period between the values of exports and
imports of physical goods
B1= E-M
B1– balance of trade
E– value of exports
M– value of imports
9. Debit and Credit in BOT
•Debit items -imports, foreign aid,
domestic spending abroad and
domestic investments abroad.
•Credit items include exports, foreign
spending in the domestic economy
and foreign investments in the
domestic economy
10. Balance of Payment
The balance of payments, (or BOP)
measures the payments that flow
between any individual country and all
other countries. It is used to summarize
all international Economic
Transactions for that country during a
specific time period, usually a year.
11. The BOP is determined by the
country's exports and imports of
goods, services, and financial
capital, as well as financial
transfers. It reflects all payments
and liabilities to foreigners
(debits) and all payments and
obligations received from
foreigners (credits).
13. Types of economic
transactions
•Purchase or sale of goods- quid pro quo
•Barter transactions
•Exchange of financial transactions
•A unilateral gift in kind
•A unilateral financial gift
15. COMPONENTS
Current A/C
Merchandise Invisible
Service
Transfer
Capital A/C
direct
investment
Portfolio
investment
Capital flows
Reserve A/C
16.
17. Current trends
Forced dynamism
Cooperation among countries
Liberalization of cross borders
Transfer of technology
Growth in emerging markets
Increasing influence of states on
international trade
19. TARIFF
•Tax levied on goods
•Levied on export- export tariff
•Levied on import- import tariff
•Tariff which levied on goods that pass through nation-transit
tariff
•Import tariff more used than export tariff
EFFECTS:
•Raises prices of goods
•Leads to gain for government
•Gain for domestic producers
•Loss for consumers
•Reduction in overall efficiency
20. CLASSIFICATION
Import Tariff- levy on importing goods
Export Tariff- levy on exporting goods
Protective Tariff- protect home industry against foreign
countries
Revenue Tariff- to generate tax for government
Tariff Surcharge- temporary action
Countervailing Duty- permanent surcharge
Specific Duties- specified amount for certain quantity
Ad valorem duties- according to value
Combined rate- combination of specific and ad valorem
Single stage- collected only one point of production
VAT
Cascade taxes- collected at each point in manufacturing
Excise taxes- one time charge
21. NONTARIFF BARRIERS
Non tariff barriers are trade barriers that
restricts imports but are not in the usual
form of a tariff. (for quantities, ex.WTO as a
rule framing)
TYPES
Subsidies
Quotas- quantitative form of restriction
voluntary export restraints- when it
exceeds maximum quantitative
Administrative policy- discouraging export
and import
22. Anti dumping policy-charging
extra import duty
Local contents requirements
Standards
Reciprocal requirements-instead
of currency need to
buy goods from our country
Customs variation- ad
volrem duty
23. VOLUNTARY CONSTRAINT
Country voluntarily restricts or stops
imports from coming in
Used to limit competition
24. WTO
•The WTO was set up in 1995 as a successor
to GATT.
•The World Trade Organization (WTO) is the
only global international organization dealing
with the rules of trade between nations.
OBJECTIVES:
•The goal is to help producers of goods and
services, exporters, and importers conduct their
business.
25. OBJECTIVES
•To improve standard of living
•To ensure full employment
•To enlarge production and trade
goods
•Realizing these aims consistently
with sustainable development and
environmental protection
•Secure proper share in the growth
of international trade
26. FUNCTIONS
•Helping developing and transition
economies.
•Specialized help for export
•WTO in global economic policy making
•Taking information
•Giving information to public
•Encouraging development and
economic reform
27. Structure of WTO
Ministerial conference- policy making
and strategy making
General council- dispute settlement
body and review of trade policy
Councils- for goods and for
services(supervisors)
Committee and management bodies-
◦ sees issues regarding trade and
development
◦ Balance of payments
◦ Budget finance and admin works
28. BENEFITS
Promotes peace with nations
Disputes are handled
constructively
Rules makes life easier
Free trade
Choice of products
Trade raises income
More efficient
Good governance
29. LIMITATIONS
Fundamentally undemocratic
Tramples labor and human rights
Inequality
Hurts poor and small countries
Undermines local level decision
making
30. EXIM
MEANING
•The foreign trade of a country consists of inward
and outward movement of goods and services,
which results into outflow and inflow of foreign
exchange- EXIM TRADE.
For orderly growth,
•Foreign trade of India is governed by FOREIGN
TRADE(DEVEOPLMENT & REGULATION) ACT, 1992
•Payment for exports and imports- foreign exchange
management act, 1999
•Customs act, 1962- physical movements of goods and
services
•For quality export and import- exports(quality control &
inspection)Act, 1963
31. PRIMARY REASONS
Availability- some goods cannot
create in home country
Cachet- for an image- example
foreign brands
Price- low price – example Mexican
clothing, toys from Korea
32. Export Trade
The term export refers to “selling goods and
services produced in home country to other
country markets.”
◦ Export of goods
◦ Export of services
CLASSIFICATION OF EXPORT TRADE
Merchandise exports-readymade, garments etc.,
Services exports- software, telecommunication
Project exports- establishment of projects in another country
Deemed exports-the transfer of infrared camera technology to a
Chinese national in the U.S. may be regulated as if the transfer of the
technology was made to the Chinese national in China. The transfer
is thus “deemed” to be to China even though all activities take place
in the U.S.
34. 1. Registration Stage
a) Registration of organization
• - companies act 1956
• Partnership act, 1932
• Sale trader must get permission from local authority
b)Opening bank Account- current account- bank also helps for
pre-shipment and post shipment
c) IEC no- prior to IEC, CNX number issued by RBI. Director
General for Foreign Trade (DGFT)- Fees Rs.1000
d) PAN number- for claiming exemptions and deductions under
Income Tax
e) Sales Tax number- must register under Sales Tax Authority-for
exemption
f) Registration with Export Promotion Council ( EPC)-
“Registration cum Membership Certificate” (RCMC)
e) Registration with ECGC- financial assistance, risk assistance
g) Registration with other authority- FIEO, ITPO, COC etc.,
35. 2. Pre shipment Stage
Approaching foreign buyers- for adopting techniques
Inquiry and offer- about description of the product from the
importer after inquiry the export must process immediately in
form of Performa invoice
Confirmation of order- finalizing terms and conditions- exporter
must send three copies of Performa for confirmation and importer
signs these copies and sends back to exporter
Opening letter of credit- for secured payment method on the
finalization of export contract- importer opens in favor of
exporter
Pre-shipment finance- for procuring raw materials and necessary
things.
Production or procurement of Goods-
Packing and marking- destination address, port of shipment,
weight, etc.
Pre-shipment inspection- Export Inspection Agency- inspection
certificate
36. 3. Shipment Stage
•Reservation of shipping space- must obtain Shipping Order
•Arrangement of internal transportation up to port of shipment- either
by railways or roadways
•Preparation and process of shipping document
•Letter of contract
•Commercial invoice
•Packing list or packing note
•Certificate of origin
•GR form
•ARE-I form
•Certificate of inspection
•Marine insurance policy
•Customs clearance- verification of documents
•Obtaining Carting Order from Port Trust Authorities- for moving the
cargo inside the dock
•Let Export order
•Let ship order
•Bill of lading- issued by shipping company to C & F agent
37. 4. Post shipment Stage
• Submission of documents by C & F to Exporter
• Shipment advice to importer- informing about the shipment
• Presentation of document to bank for negotiation- submission
of documents to bank for getting payment from the bank
• Dispatch of documents- after verification – sends to importers
bank
• Acceptance of bill of exchange-
• Types
1. Documents against payment- cash on delivery
2. Documents against acceptance- promising to pay
3. Letter of indemnity- security or protection against a loss or
other financial burden.
4. Realization of export proceeds-importer pays amount to
exporter
• Processing of GR form- verification – then export considered
to be completed
• Realization of export incentives- for any claims
38. Benefits and
Limitations Benefits
Sources of revenues
Market diversification
Excess production
capacity
Purchasing power
Operation stability
Lifecycle extension
Product improvement
Lower unit costs
Economies of scale
Untapped markets
Limitations
Financial management
efforts
Customer demand
Communication
technologies
improvement
Management mistakes
39. Import trade
The import is any good or service
brought in from other country for use
in trade
Import goods or services are provided
to domestic consumers by foreign
producers
An import in the receiving country is
an export to the sending country
40. IMPORT
Consumer
goods
1. Convenience
goods
2. Shopping goods
3. Specialty goods
Industrial
goods
Intermediat
e goods
1. Installations
2. Accessory equipment
3. Raw materials
4. Fabricated parts and
materials
5. Industrial supplies
Services
1.Intangabilty and
importing
2. Perish ability and
importing
3. Inseparability
4. Variability
41. Import process
Trade enquiry
Obtaining import license
Obtaining foreign exchange
Placing the indent order
Letter of credit
Shipping documents
Clearing agent
Taking delivery
42. Benefits and Limitations
Benefits
Development of
economy
Meet shortages
Imports for better
living standards
Quality production
Comparative
advantage
Importing easy
Limitations
Financial risk
Operational risk
Regulatory risk
Political risk
Cultural risk